Disability Income Insurance Policy Buyer’s Checklist

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Disability income insurance policy buyer’s checklist

This article provides a checklist of basic issues you need to consider when you purchase a disability income insurance policy. The checklist not only will help guide your decisions but also will make it easy to compare features of different policies. This part covers definitions of disability and benefits; it raises questions to consider about elimination periods, length of benefit periods and partial disability benefits, and covers return to work, recurrent disability, cost of living adjustments and mental health/substance abuse. Click for further tips on purchasing disability income insurance. Company Name: Contact Person: Telephone Number: Definition of Disability 1. How does the policy define disability? Do you receive benefits if you are not able to perform the major duties of your own occupation (“own occ”), or must you be unable to perform the major duties of any occupation (“any occ”)? _____ “own occ” _____ “any occ” 2. How long will benefits be collected under this definition? _______________ 3. Will the policy pay benefits even if you are able to earn a specific percentage of your salary? _____ Yes _____ No 4. If yes, what is the percentage? _________ 5. Does the policy cover disability resulting from both accident and illness, or is it an accident only policy? _____ Accident _____ Illness 6. Are full benefits paid, whether or not you are able to work, for any or all of the following? _____ Loss of sight _____ Loss of speech _____ Loss of hearing _____ Loss of use of limbs Benefit Amount 7. Is the monthly disability benefit under the policy a percentage of your regular income or a flat amount? _____ Percentage of income at _____ per cent _____Flat amount of $________ 8. Is there a maximum percentage or flat amount above which the insurance company will not issue a policy? _______ Maximum percentage _______Maximum flat amount Elimination Period A few policies pay benefits immediately after the insured is disabled, but almost all polices have some kind of waiting, or elimination, period. These periods can range from two weeks to one year or longer. You may have some control over the length of the elimination period at the time you purchase your policy If you do, you need to weigh the more expensive premium for a shorter elimination period against the lower premium for a longer elimination period. 10. 10. Consider all the resources you may have, including spouse’s income, savings, unused sick leave, paid vacation and any government disability benefits. How long can you wait before your benefits begin if you were to become disabled and unable to work? _____ Less than one month _____ One to three months _____ Three to six months _____ Longer than six months 11. What is the proposed elimination period for this policy? _____ Months Length of Benefit Period For most disabilities, policies pay benefits until retirement age, but shorter benefit periods may be available at lower cost. 12. How long does this policy pay benefits? _____ Years Until Age______ 13. Does the length of the benefit period depend on whether the disability is due to an accident or illness? _____ Years for accident _____ Years for illness Benefits for Partial Disability Some policies provide partial benefits (sometimes called residual benefits) for a partial disability that keeps you from doing part of your job or from working full time. 14. Does this policy provide partial disability benefits? _____ Yes _____ No 15. Is this benefit only available after a period of total disability? _____ Yes _____ No Replacing Lost Income Some policies provide a benefit to make up for income lost if you must take a lower paying job because of your disability. 16. Does this policy provide benefits if your disability results in reduced income? _____ Yes _____ No Return to Work Return to work or rehabilitation provisions in some policies require the insurance company to pay for training, modifications to your work environment, or other services that assist you in returning to work. 17. Does this policy have return to work or rehabilitation provisions? _____Yes _____ No (If the policy has no such provision, find out if the insurance company has an informal practice of helping in this area; it benefits the company if you return to work. Be aware, though, that unwritten, informal practices can change.) Recurrent Disability If you return to work after recovering from a disability and then have a relapse within a specified period of time, usually six months, most policies do not require another elimination period before you begin to receive benefits again. 18. Does this policy require you to wait through another elimination period in the case of recurrent disability? _____ Yes _____ No 19. If no, what is the specified period of time for a recurrent disability to occur before you would be subject to a second elimination period? _____ Months Cost of Living Adjustments A cost of living adjustment benefit (sometimes called an inflation adjustment benefit) provides for periodic increases in the benefit amount usually tied to increases in the cost of living. 20. Does the policy provide a for an automatic cost of living adjustment? _____ Yes _____ No Mental Health/Substance Abuse Most policies limit benefits for disability resulting from mental illness or substance abuse.. The typical benefit maximum is two years, but these limits usually do not apply when either problem requires institutionalization. 21.How long does this policy pay benefits for disabilities resulting from substance abuse or mental illness? _____ Years Is institutionalization an exception? _______ Noncancellable and Guaranteed Renewable Most policies are either noncancellable or guaranteed renewable. Both types of polices usually can be renewed each year until age 65. The insurance company can cancel neither type of policy as long as premiums are paid on time. The insurance company can never increase premiums under a noncancellable policy. The insurance company can increase premiums under a guaranteed renewable policy, but only for an entire class of policyholders, not based on individual experience. A noncancellable policy will be more expensive than the guaranteed renewable policy. 22. What is this policy? _____ Noncancellable _____ Guaranteed Renewable Waiver of Premium Many policies provide a waiver of premium benefit. This benefit may begin immediately when you become disabled or the policy may specify a waiting period. 23. How long must an insured be disabled before premiums are waived? _____ Months 24. For which benefits does a waiver apply? _____ Total disability _____ Partial disability _____ Recurrent disability Option to Purchase Some policies provide an option to buy additional insurance at a later date without requiring additional evidence of medical insurability. 25. 25. Does this policy provide an option to purchase additional disability income insurance without requiring current medical evidence of insurability? _____ Yes _____ No Premium 26. What is the premium for this policy? $____________ per __________
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